FT. LAUDERDALE, FL-After three years of contraction, roughly 700office-using jobs are forecast to be created in Broward County in2010, a 0.2% gain, according to Marcus & Millichap’s Office Research Market Update for the second quarter. Butnewly-hired workers are not expected to stimulate demand for newspace, because 2.7 million square feet of empty space hasaccumulated, which will be filled first, according to thereport.

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In recent months, there has been some increased interest byinvestors in the purchase of office buildings, according to Marcus& Millichap, because they foresee a little more demand forspace and are heartened by the lack of new construction in thecounty. The only reason there hasn’t been a lot of sales activityis that few properties have been for sale in the last 12 months.The report did not list any specific sales of office buildings.

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Investors, by and large, seek out the class A properties eventhough their performance has declined as the recession hascontinued. Cap rates, although variable, depending on location andasset, have averaged from the high 8% to the low 9% range forsolid, class B properties, according to the report. Therehave been few class A sales of late, but their cap rates areprobably 100 basis points lower than for the class B propertieswhich have sold, according to Marcus & Millichap.

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All Broward submarkets have experienced higher vacancies andlower rents, and the northern half of the county has been moreaffected than the southern half, due to a loss of population andpopulation-driven and housing-driven employment. Vacancy rates weremore than 24% in the Cypress Creek and Coral Springs submarkets inthe northern half of the county.

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The already-completed 86,000 square feet of space at the Villageof Gulf Stream Park, a new retail complex at the southern end ofthe county, will be the only office space expected to be built thisyear. Just 165,000 square feet of office space was added in 2009,according to Marcus & Millichap.

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The vacancy rate will go up 210 basis points in 2010 to 21.1%and negative net absorption is forecast to be over 500,000 squarefeet compared with over 1.4 million square feet of negativeabsorption in 2009, according to the Marcus & Millichap report. And with vacancy rising, rents will be falling: asking rentsare expected to fall by 2.6% to $25.09 per square foot, andeffective rents by 4.4% to $19.70 per square foot this year.

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Soft demand underpinned a 0.7% drop in asking rents during thesecond quarter to $25.57 per square foot. On a year-over-yearbasis, asking rents countywide declined 2%. Effective rents fell4.3% in the past 12 months, including a 1.3% dip in the secondquarter to $20.23 per square foot, according to Marcus &Millichap.

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Rent concessions in Broward County are still an important factorin the office rental market. They have gone from 15% of askingrents at the start of the recession to 20.9% of asking rents in thesecond quarter of 2010. Concessions were slightly higher in thesouthern half of the county, according to Marcus & Millichap,or 21.9% of asking rents.

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Over the past 12 months, sales velocity declined 10%, but morethan half of the transactions which did take place, did so in thelast six months, an indication that there has been an increase insales activity. But the median price for deals done during the past12 months was $127 per square foot, 27% less than in the preceding12 months. Several sales of properties with high vacanciescontributed to the decline.

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